Makepeace uses diversity strategy to spur growth

Friday

Nov 22, 2013 at 12:01 AMNov 25, 2013 at 6:32 PM

A.D. Makepeace Co., the largest cranberry grower in Massachusetts and one of the top three producers in the world, relies on diverse business interests to stabilize and grow its business including real estate developments, a custom soil and material business and its agricultural interests. The company is majority-owned by the Makepeace family, who have a long history and reputation for community generosity in the region. Recently, CEO Michael Hogan spoke with the SCBB about the company's growth and its philosophy of giving.

A.D. Makepeace Co., the largest cranberry grower in Massachusetts and one of the top three producers in the world, relies on diverse business interests to stabilize and grow its business including real estate developments, a custom soil and material business and its agricultural interests. The company is majority-owned by the Makepeace family, who have a long history and reputation for community generosity in the region. Recently, CEO Michael Hogan spoke with the SCBB about the company's growth and its philosophy of giving.This interview has been condensed and edited.

Q: What does Makepeace do?A: We're a very diverse company. We are over 156 years old and that diversity actually goes back to the founding. But at the end of the day we are a land company and our goal is to be able to optimize the value of our land holdings and create operating businesses based on that, to provide the best return for our shareholders. I lead a team of 150 people for a family that's still heavily invested in the communities and in the region and in the company. Their imprint is still on the board and what we do. They take a great deal of pride in the family legacy of giving back to the community and reinvesting in the community and that's clearly articulated in our values as a company.Q: Where do cranberries fit in Makepeace's overall strategy?A: Our goal is to have the cranberry business be roughly 50 percent of our business. It is at its heart a commodity business, so it rides cycles. Our largest customer is Ocean Spray for our cranberry business. We're one of the founders (of Ocean Spray). We are an owner, but we're also a supplier.We work to improve our yields and provide product to Ocean Spray that allows us to get paid a premium because of color and because of size. And we also look at other markets that we can deliver specific fruit to that we would get paid a premium for.But our goal is to not be captive to the commodity market of cranberries. So by taking basically the same land and looking at the soils and materials business, the real estate development, the real estate leasing, small utilities, the retail and agricultural tourism, that helps us to have diverse income that is, in many ways, counter-cyclical to the cranberry cycles. And that gives us stability and the ability to grow and to buffer downturns of any one product or any one market.Overall, for the last five years, we have grown on average 11 percent per year even through the downturn, which on the real estate side kind of shows our strengths by having a diversified business.

Q: Do you look to expand your cranberry production?A: When I got here we produced 203,000 barrels my first year; we averaged about 225,000. A barrel is 100 pounds. Last two years we averaged about 350,000 barrels and we are on track to, based on investments we've made, be consistently growing over 400,000 barrels in Massachusetts. We also are regularly looking at opportunities to expand into other growing areas. We've done some acquisitions in Massachusetts and we've invested very heavily here, but we're also looking and following other growing areas to see what trends are happening there and prices and yields.

Q: Is there a defined territory that encompasses Makepeace customers?A: Our customers for our real estate development are really regional. Our materials business, the custom soils business, is now pretty much all of the Northeast. We sell into New York, Connecticut, and New Jersey. We've now expanded our operations there that we have a physical presence in Connecticut right now. It serves Connecticut and the Long Island area, and we're currently looking at opening an operation in New Hampshire.

Q: What land developments is Makepeace currently pursuing?A: We have right now four significant mixed-use developments in this immediate area. The Rosebrooks, which are two projects: Rosebrook Business Park (on Route 28) in Wareham has its first building, just under 60,000 square-feet, that is fully leased now to Southcoast Health System and Fresenius Medical. We're currently marketing the second building which will be a combination of health care and technology and education. We're hopeful that we'll be able to break ground on that building sometime this coming year.(Secondly,) Rosebrook Place is anchored by two buildings — the hotel with the Lafrance family, the Marriott Towne Commons. That's going to be a major investment and boost for the area. There are a number of naysayers who said you couldn't get a hotel and you certainly couldn't get a national flag to come to this location. And we've got an experienced hotel operator with a significant investment and function facility and Marriott happy to put their flag on that site. Then the anchor on the other side is Cape Cod Five and Rogers and Gray. And we've got two other tenants that we are currently negotiating letters of intent for that building. So our goal is that when it opens in the spring of 2014, it will be full.The third, Rochester Crossroads, is strictly a retail development at exit 2 in 495 in Rochester. We have a couple of parcels out, parcels that we are currently negotiating to be built in the next year. We are focusing on larger users on that site. That's about 35 acres total and we see that as a good destination for retail and infill retail destination.And then our in Big River Run development in Plymouth where we're currently building the water and wastewater plant and the Village Green. We're negotiating master builder partnerships right now to be able to be under construction with the first residential units next year. And we've finalized agreement with the Old Colony YMCA to build their new building which will be available late fall of 2014. That's a 25,000-square-foot YMCA facility right in the Village Green.

Q: Bringing a hotel to town is exciting. How did you pull that off?A: We were very deliberate. We went out to the marketplace twice. We did very strong market studies. We worked very closely with the (Cape Cod Canal Region) Chamber of Commerce to do an assessment of what businesses needed in terms of rooms. We talked to the colleges nearby. Mass Maritime is a good example; they've got needs that hadn't really factored into the marketplace before and then we went out and we solicited proposals.We knew a number of folks who had interest in this marketplace but we also knew the Lafrance family in particular. We had done business with them. We've used their facilities in New Bedford and we thought, and they agreed, that the combination of their family business and expertise and our family business and expertise was a great combination. We've worked through the tax increment agreement with the town of Wareham. Wareham's been a great partner. We were able to achieve a liquor license for them to be able to do a full service function facility which there's a great need in this region for. So it was one of those old-fashioned networking collaborative efforts pulling an awful lot of pieces together and convincing folks at Marriott that this was the right place. And it's going to be a home run for the area.

Q: Makepeace does a significant amount of local giving. Is that part of your marketing strategy?A: Most companies do sponsorships of local events, little leagues and soccer teams and school sports and that's important. I think everyone should do that. It's being part of the fabric of a community. The other piece of what we do really harkens back to the earlier and current generations of the Makepeace family who really believed in and believe in philanthropy and investing in the community. From the YMCA to Tobey Hospital and the maternity ward there, to the cranberry industry research center, there are so many things that they've been involved in over the years.I think we formalized that with the Makepeace Neighborhood Fund into what I sometimes call strategic philanthropy and we've recognized some core areas in the communities that we work in that have great synergies with our business. We think it's important to support those efforts: environmental and agricultural, education and outreach and preservation and health care are big parts of it. We've probably invested most heavily in education. We work in communities that have limited commercial tax bases and have been stressed in terms of supporting education.Is there a marketing benefit? Yes, but it's not the primary reason why we do it. There's kind of a social compact that you have an obligation to reinvest and to give back to the community and we believe rather than doing it scattershot, to pick a handful of areas that we think we can have a real impact has born fruit for us.The one place that it's a real tangible value is as it relates to Ocean Spray and some of their customers. We've just done a sustainability audit and that is required by a number of large customers of Ocean Spray right now. They're looking for farm sustainability as part of the supplier network and one of the first thresholds that they look at is your investment in the community. We didn't set out to do it 10 years ago when we started doing this formally, but it's kind of interesting how well it lines up with some of the expectations of the large companies that are looking for this in terms of what their supplier chain does.Go online to hear Michael Hogan's thoughts about workforce challenges and more.

Q: Where do you stand in terms of production among cranberry growers?A: We are the largest producer in Massachusetts. We are consistently in the top two or three in the world in terms of total crop. We grow on more acres than anybody does in the world. There are two other producers, one in New Jersey that has an investment in Chile and then a farm in Chile and the three of us are consistently right around the same production, give or take 10 percent.

Q:How does this year’s crop look?A: We still have a very large crop this year. It’s probably a little smaller than we expected. The lack of rain and very high temperatures in late July and early August has really affected the industry in Massachusetts this year. There was a lot of fruit out there, it just didn’t get as large as it would have without rain. The weights are a little bit off, but for us we’ll still have a crop well in excess of 300,000 barrels.

Q: What are some of the challenges Makepeace faces today?A: I think as most growing companies would say, the biggest challenges are finding the right workforce with the right skills and it’s across all of our businesses. The level of technology orientation across all of our businesses is important, science and math, accounting and finance backgrounds.Finding the right skills and the right talent and keeping them is a real challenge. We’ve invested heavily on inhouse training and we’re now focused on very robust partnerships with schools and colleges. We have internships with Mass Maritime Academy, with Upper Cape Voc-Tech, with Stonehill College, with Bridgewater State University. We partner with UMass Dartmouth and we’re doing more with the community colleges around development. We’re about to hopefully get some graduate students from Northeastern to help us with some of our land use and engineering and environmental programs.We’ve found that we have a very good, high quality workforce and we need to constantly invest in them but we also need to find the workforce of the future. And we’ve found the best way to do that is to create these partnerships with the colleges and the universities and the trade schools.